Rewebster has already stated the general rule of thumb. However, we recently got a 30-yr fixed mortgage with no money down, but we are required to pay about $40 dollars in mortgage insurance until 20% of the principal is paid off. Look into FHA loans; depending on your financial situation and credit history you may qualify for free grant money also to pay off part of your closing costs. Getting this grant and seller's assistance, we actually walked away from our closing with $18 in our pocket. =)

Never ever get a variable rate mortgage. I think balloon payments are not good either--things in life happen unexpectedly. I don't know why people do it. I guess the temptation and emotion of owning a dream house overpowers the logic of knowing one's real financial capabilities.

That's a pretty reasonable rule of thumb. They are checking things more closely these days with the credit crunch, but that still looks like it would fly if your income looks like it can support the mortgage.

I disagree: my first mortgage was an ARM. It was a useful financial instrument for me. It took me 9 years and 3 more mortgages in total, but today I own my house.

Yes, your right. I was probably too strong with that the comment. They probably work out well for some people, but for others, the rate increases dramatically over time and they go into foreclosure because they can't make the monthly payments.

Basically, is there any general rule of thumb regarding how much money you should have set aside in the form of a down payment, so as to have a viable chance of getting approved for a mortgage loan?

The old (pre-insanity) rule of thumb is 20% down, and no more than two and a half times your annual income in the loan. Depending on where you live, now might not be the best time to buy. Interest rates are currently very low, so ARM financing is very risky.